RETIREMENT INFORMATION
All hard workers dream of the time when they can finally enjoy their extended vacation. However, in order to have confidence about your future retirement years, you must have a substantial savings nest egg. Without the funds to support your retirement, the most anticipated time of your life can become one of the most dreaded.
Retirement planning is something that should be started early on in life to ensure that you have enough income during your extended vacation. Since each individual’s current and future needs are unique, it is important that you strategize your income savings with an expert so that you can feel confident entering your retirement years.
There are a wide range of options available to you in regards to retirement savings. Allow the knowledgeable and experienced professionals at Crowe & Associates to be your guiding hand for everything retirement related.
Guaranteed Income VS. S&P 500 Index Fund
In a perfect world, where the S&P 500 generates 10 percent return year after year, the Guaranteed Income would not be recommendable, but in reality, the market has had huge swings. The reason for a Guaranteed Income strategy is that it guards against someone wanting to retire at a specific time, regardless if that happens to be during a downturn swing.
GURANTEED INCOME VS. S&P INDEX FUND
In a perfect world, where the S&P 500 generates 10 percent return year after year, the Guaranteed Income would not be recommendable, but in reality, the market has had huge swings. The reason for a Guaranteed Income strategy is that it guards against someone wanting to retire at a specific time, regardless if that happens to be during a downturn swing.
If a person was looking to retire in 2009, and in 2001 put their money in the market hoping to ride it up as the market increases, they would have been very disappointed. Unfortunately in 2009, when the individual wanted to retire and started to withdraw their money, the $100,000 investment would have been down to $69,000. If they were to invest in a Guaranteed Income strategy, their investment would have grown to $131,000.
Retirement Income Strategy
Planning for retirement has become a risky business for most. The majority of future retirees are no longer offered a private pension plan. Instead, they will need to rely on their deferred compensation plan, such as a 401K, to provide the income needed in retirement. Two of the most prevalent concerns with relying on a deferred compensation plan…
RETIREMENT INCOME STRATEGY
Planning for retirement has become a risky business for most. The majority of future retirees are no longer offered a private pension plan. Instead, they will need to rely on their deferred compensation plan, such as a 401K, to provide the income needed in retirement. Two of the most prevalent concerns with relying on a deferred compensation plan are trying to determine how much the lump sum will be when retirement starts and how much can be taken as income during retirement.
The majority of individuals investing their money in 401K plans will need to rely on market performance and timing. They obviously want the lump sum to grow as much as possible to allow for maximum income to be taken during retirement years. The reality is that they will likely need to rely on good luck to be in the best position possible. Timing makes a huge difference and can have drastic effects on future income. A guaranteed method can be used to avoid the risk associated with poor market timing.
A guaranteed income method is a safe and predictable method to plan income during retirement. Playing money in the market under the best circumstances can yield a slightly higher return, but it also exposes the retiree to unnecessary market risk.
The knowledgeable professionals at Crowe & Associates will help you determine the best method for retirement savings. Contact us today to get started!
LTC Deposit Products Vs. Traditional Long Term Care
Long-term care (LTC) insurance provides needed protection against the costs of home health care, skilled nursing care, and institutional care. While there are a number of reasons to purchase a long-term care insurance policy, one of the most important influences is to protect hard-earned assets. If some form of care is needed, a LTC policy…
LTC DEPOSIT PRODUCTS VS. TRADITIONAL LONG TERM CARE
Long term care (LTC) insurance provides needed protection against the costs of home health care, skilled nursing care, and institutional care. While there are a number of reasons to purchase a long-term care insurance policy, one of the most important influences is to protect hard-earned assets. If some form of care is needed, a LTC policy will help to cover the additional expenses associated with that care and alleviate the need to spend assets in order to cover the cost.
While it is a needed benefit for many, LTC does have its drawbacks. The first is the prohibitive cost of the policy. LTC premiums can represent a substantial investment over time and are increasingly expensive for those who purchase the policy later in life. A second drawback is the risk of carrying the policy for years to ultimately never use the benefits. There are some LTC plans that provide a return of premiums feature, but they are restrictive and full of exceptions. /p>
Saving on Premiums: LTC Deposit Strategy
An LTC deposit strategy will also protect assets against the cost of long term care and offers major advantages over a traditional LTC policy. The deposit program uses a portion of the investable assets as leverage in the event future Long Term Health Care expenses are incurred.
The money is…
LTC DEPOSIT PRODUCTS VS. TRADITIONAL LONG TERM CARE
An LTC deposit strategy will also protect assets against the cost of long-term care and offers major advantages over a traditional LTC policy. The deposit program uses a portion of the investable assets as leverage in the event future Long Term Health Care expenses are incurred.
The money is deposited in a non-interest bearing account. In the event that long-term care is needed, the money is leveraged by a multiple to cover the cost of care. If long-term care is never needed, the account will pay out as a leveraged death benefit. Finally, if the money is needed for some other purpose, it can be withdrawn from the account at any time without a penalty. The deposit strategy cannot be utilized by everyone since there needs to be accumulated assets that can be dedicated to the account. For those that have the funds available, this strategy will result in premium savings and added flexibility over traditional LTC plans.
The experienced and knowledgeable experts at Crowe & Associates will help you determine if you are eligible to utilize the LTC deposit strategy to save on long term care insurance premiums. Contact us today to get started!
RETIREMENT PLANING
Create a Personal Pension Stream in Working Years
Often, individuals who are about to retire will use a lump sum of money to create an income stream to support themselves during retirement. This money typically comes from a 401K, IRA, brokerage account, or some other investment tool. A major concern for these individuals is that they are never sure if the lump sum will be enough to create the needed income stream. Many factors come into play, such as the amount they save every month and…
Create a Personal Pension Stream in Working Years
Often, individuals who are about to retire will use a lump sum of money to create an income stream to support themselves during retirement. This money typically comes from a 401K, IRA, brokerage account, or some other investment tool. A major concern for these individuals is that they are never sure if the lump sum will be enough to create the needed income stream. Many factors come into play, such as the amount they save every month and investment performance while they save.
People in their savings years (30s, 40s, and early 50s) also face the problem of not knowing how much they need to save. As a result, most people save money and simply hope that it will be enough. They are not able to accurately predict investment performance over the course of 20 or 30 years which makes it impossible to know how much they will have in retirement. There are ways to accurately predict future income even when retirement is 20 to 25 years away. One method is to use guaranteed insurance contracts (GICS) in determining future income on a guaranteed basis.
As an example, we can use a 40 year old that is looking to take income in 20 years. If they deposit $100,000 into a GICS account and then contribute $3,600 a year until age 59, they will be guaranteed an income stream of $25,564.54 for life starting at age 60. If the initial deposit was a smaller amount, such as $50,000, they would still be able to generate a guaranteed income of $15,708.00 for life at age 60.
Regardless of the initial investment amount and ongoing contributions, this strategy will allow for exact income planning at any future date. Increasing the initial lump sum, the ongoing contributions, or expanding the roll up period beyond 20 years will create a large income stream in the future. Income payouts can be set up to pay for the duration of one or two lives depending on the situation.
The experienced professionals at Crowe & Associates will help you with your retirement planning. We will go above and beyond to ensure that you are on the right track so that you can look forward to retirement with confidence and peace of mind.
Is the 4 Percent Income Rule Still Safe?
The ability to sustain a steady income during retirement has always been a primary concern for individuals and families in the United States. Recent studies have shown that approximately 61 percent of U.S residents ages 44 through 75 are more afraid of running out of savings/income than they are of death. In order to avoid exhausting a savings nest egg, guidelines have been developed. The most popular is the 4 percent income rule…
IS THE PERCENT INCOME RULE STILL SAFE?
The ability to sustain a steady income during retirement has always been a primary concern for individuals and families in the United States. Recent studies have shown that approximately 61 percent of U.S residents ages 44 through 75 are more afraid of running out of savings/income than they are of death. In order to avoid exhausting a savings nest egg, guidelines have been developed. The most popular is the 4 percent income rule.
The 4 percent income rule was developed in the early 1990s by a certified financial planner named William Bengen. He set 4 percent as the amount of money a retiree can take out of their investments every year with a high probability that it will last for at least 30 years. Since its establishment, financial advisors have been utilizing the 4 percent income rule as the benchmark with their clients.
However, a recent study from the Journal of Financial Planning has suggested that 4 percent is no longer a safe number. The study determined that 1.8 percent is a more appropriate number to ensure income does not run out during retirement. The revised rate was calculated based on a variety of market factors. One marker in this study was the historically high price to earnings ratio in the market, which may lead to low future investor returns. The risk of poor market timing was also a factor. Taking income at the start of a bear market can have a drastic negative effect on account values and the ability to take future income.
Using a 1.8 percent model instead of a 4 percent model may be safer, but it has obvious drawbacks. Consider a person with a $500,000 investment account can only safely pull $9,000 a year from their account, versus the 4 percent model which allowed them to take $20,000 a year. If the 1.8 percent rule is followed, there is an obvious need to increase the investment nest egg prior to retirement, which may not be feasible for many people.
An alternative to this approach would be to use a guaranteed insurance contract (GIC) to create the needed income. The advantage of a guaranteed insurance contract is the ability to draw a much higher percentage of income on a guaranteed basis. The most competitive GICs will currently pay 5.5 percent to 6.0 percent income for life on a single life, and 5 percent on a joint life basis. Most contracts do not require forfeiture of the lump sum invested. Some GIC contracts also offer a guaranteed roll up rate during the accumulation period. It is not uncommon for companies to offer a 7 percent or 8 percent compound accrual rate for up to 30 years. The guaranteed roll up allows for more precise planning of future asset needs.
While using a GIC can offer many advantages, caution must also be taken. There are hundreds of companies currently offering various bells and whistles on GIC contracts in order to gain market share. Some offer benefits or rates that look appealing, but in reality, have little benefit to the consumer. Others will promote incredibly high roll up on accumulation, but will then lower the guaranteed income payout. The most important features should be compared prior to choosing a contract in order to obtain the best guarantees available.
The experienced professionals at Crowe & Associates will help you with your retirement planning. We will go above and beyond to ensure that you are utilizing the right investment tool so that you can look forward to retirement with ultimate peace of mind.